Evidence Mounting that Trump Tariffs are Working

September 9, 2019

The July trade data released on Friday by the Commerce Department provides evidence that the tariffs implemented by the Trump administration on Chinese imports are working.  The purpose of the tariffs, of course, is to shift manufacturing away from China and back to the U.S. to bolster the U.S. economy and manufacturing employment and break America’s dependence on massive budget deficits to counteract the damage done by trade deficits.

You won’t find much evidence of it in the headline number – the overall trade deficit – which shrunk marginally in July to $54 billion, a figure actually slightly worse than a year ago – $53.4 billion in July, 2018.  You have to look deeper at what’s happening with manufactured goods – not just “goods” in general, which the Commerce Department tracks and which includes trade in resources like oil and and farm products that have little impact on job creation.  The trade deficit in manufactured goods has been deteriorating rapidly for many years, interrupted only by the “Great Recession” in 2008/2009.  From January, 2010 to December of 2018, the deficit in manufactured goods nearly tripled, from $28.6 billion to $76.5 billion.  However, in the past twelve months, the deficit in manufactured goods has risen by only $0.3 billion – an actual decline when adjusted for inflation – and has actually fallen by $6.4 billion since the record of $76.5 billion set in December.

The impact on trade with China has been dramatic.  Through 2018, the deficit with China had been rising at a rate of about 10% per year, from $56.9 billion in 1998 to $419.5 billion in 2018.  In 2019, however, the deficit has fallen by 12% and the rate of decline is accelerating, though it ticked up slightly in July, likely the result of importers stockpiling goods in anticipation of the next round of tariffs.

The effect on manufacturing employment in the U.S. has been much less dramatic, though there has been some effect.  Manufacturing employment gains have been slow in 2019 after a strong 2018, but that may be about to change.  The Labor Department reported on Friday that, while the average work week in the U.S. rose a tenth of an hour to 34.4 hours, the manufacturing work week rose by 0.2 hours to 40.6 hours.  That bodes well for an overdue jump in manufacturing employment as employers look to cut overtime costs.  Also, although the headline number of Friday’s employment report – 130,000 jobs added in August (according the establishment survey portion of the report) – was below expectations for a gain of about 158,000 – what went unreported was that employment in the U.S. (as measured by the household survey portion of the report) rose by nearly 600,000!

And there’s this:  https://www.reuters.com/article/us-usa-economy-women/tight-u-s-labor-market-shrinks-gender-and-race-gaps-to-record-lows-idUSKCN1VR2JC.  In August, the gap in the labor force participation rate between men and women fell to an all-time record low and black unemployment also fell to an all-time record low.

Still, job gains in manufacturing at this point could be and should be much better.  What’s holding it back is Trump’s failure to expand his tariff policy beyond China, enabling companies to shift production from China to secondary suppliers in other countries – especially Mexico – where the trade deficit has jumped 24%.  Mexican workers have been the biggest beneficiaries of the tariffs on China, not Americans.

Trump can’t really claim that he’s “Made American Great Again” until manufacturing jobs come back to the U.S. in a much bigger way.  That can’t happen until he applies tariffs beyond China to include Mexico and imported autos from Europe, Japan and South Korea.  The results with China prove that they work.  Why is he holding back?


“Embrace change,” corporate America!

September 3, 2019

I was there, working in manufacturing in the 1980s, when a cold wind swept across America.  I was there when our corporations, until then led by manufacturing and the engineers who rose up through its ranks, kicked manufacturing to the curb and replaced their leadership with marketing people, skilled in the art of B.S., and bean counters, focused on nothing but cutting costs.  I was there when the United Nations and the World Trade Organization embarked on their campaign of raising poor nations out of poverty through the systematic plundering of jobs from the U.S. – as many jobs as possible without tipping the balance of power in favor of bad actors who might threaten this new concept of “globalism” and the “New World Order” – the new regime of parasites dedicated to keeping its U.S. host alive just enough to keep the blood flowing.

I was there when they began scaling back manufacturing operations, laying off good workers and closing plants.  “Embrace change,” we were told constantly by business managers with an air of condescension, as though they were addressing fools too dumb to recognize good things and good opportunities when they see it.  We had made careers of embracing change – change for the better – changes that automated our factories, boosted production, cut emissions, improved quality and grew profits.  Now we were being insulted by con men whose only goal was the next promotion, which required laying off more people than the next guy.

I was there at a big division-wide meeting – one of those meetings whose purpose was ostensibly to gather input, but it was clear from the start that input was the last thing they wanted.  What they wanted was “buy in” for the new direction of the company.  In other words, you’d better accept what’s coming enthusiastically, with a big smile on your face, if you know what’s good for you.  The leader, the division manager, asked, “what are we going to need to succeed?”  I raised my hand and replied – perhaps naively or perhaps in a thinly-veiled attempt to stand up for what I and many others present had built our careers around.  “We’ll need excellence in manufacturing.”  I was stunned by his arrogant, dismissive reply.  “Why?  We don’t need that.  We can buy that!”  I thought to myself, “you dumbass, you can buy it if you want, but you still need it, and now you’re at the mercy of your supplier.”  But it would have been a pointless example of falling on your own sword to come right out and say it.  “Embrace change.”  Here it comes.

Our final days before closing the doors were spent writing operating procedures, documenting every detail of our operations, and then training workers brought over from foreign subsidiaries.  We were forced to facilitate the widespread technology transfer that played a critical role in ruining the American economy.

It’s decades later and the tables have turned.  As it always does, the pendulum swung too far.  The globalist corporations over-played their hand, planting the seeds of political change.  Americans are sick of working for minimum wages and being the world’s chumps.  America itself can no longer fund massive trade deficits.  The wind has shifted and now blows cold on globalist dreams of reaping big profits from a China transformed into western-style consumers and from plundering the American market with cheap products.  Those dreams never had a chance.  China will never be more than a sweat-shop labor pool with their gross over-population dooming any hope of a western-style, consumer-driven economy.

In the meantime, a lot of weeds sprouted in the devastated American economic landscape.  By “weeds,” I mean business models that bring so little value to the table that they are dependent on virtual slave labor wages.  Cheap junk of poor quality has perpetuated a throw-away mindset among consumers.  Cheap clothing made of thin, flimsy fabric.  Tools that break after one use.  Auto parts and appliances that break as soon as the warranty expires.  An economy dependent on consumers burning through their severance packages.  A retail economy that employed laid-off workers manning check-out lines until everyone had burned through their savings.  An economy totally dependent on consumers buying stuff that they had no hand in producing.  All the while the economy grew.  It didn’t matter if the growth was flowers or weeds, as long as the color was green – money pouring into corporate coffers.

In the wake of Trump’s tariffs on China, retailers are having a hissy-fit when their suppliers ask for a price increase to cover the cost of the tariffs.  Products with high perceived value needn’t fear.  They’ll always find a way to be marketed successfully even if their prices do rise a few percent.  Those with low value will bite the dust.  Good riddance.  And retailers who turn their backs on good products just because the supplier needs to raise prices to make a profit – whether to cover the cost of the tariffs or, better yet, to begin manufacturing domestically – will lose out to retailers who understand their value, and they too will fail and vanish.  Again, good riddance.  It’s not like there’s a shortage of retailers.

So, corporate America, the shoe’s now on the other foot.  EMBRACE CHANGE!  Think of the possibilities and opportunities – the opportunity to cut your shipping costs dramatically, to be in charge of your manufacturing again instead of being at the mercy of Chinese companies, to boost sales to American consumers with more buying power thanks to rising wages.  EMBRACE CHANGE!!  Maybe you can mitigate some of the increased cost by cutting fat at the top layers of your organizations – those con men who grew fat and rich by ruining the lives of the people who actually did the work.  EMBRACE CHANGE!!!  Maybe you’ll survive.  If not, good riddance and adios.  Don’t let the screen door hit you on the way out.  Your workers will be fine.  The winning companies will snap them right up.